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CDC backs Indian impact fund with $25 million investment

CDC, the UK’s development finance institution, is today announcing a new investment designed to provide capital to SMEs that reach poorer and underserved communities in India.

CDC is committing $25 million to the Aavishkaar Bharat Fund (“ABF”), which invests in early stage businesses in parts of India that have not traditionally been well served by the investment community.

ABF will invest in businesses with high social impact in sectors such as agriculture, financial services, healthcare, waste and sanitation, renewable energy and logistics. The fifth, India-focused fund managed by Aavishkaar Venture Management (“Aavishkaar”), ABF has raised $92 million at its first close, and aims to reach a total fund size of $200 million.

CDC is playing an increasing role in directing its capital, and that of others, towards investments like ABF that help achieve the Sustainable Development Goals by generating social impact alongside financial returns. Aavishkaar’s funds have made 58 investments across India, Indonesia, Sri Lanka and Bangladesh. Those investments generate 250,000 jobs and livelihoods and reach 70 million beneficiaries, of which more than 50% are women. The people reached by Aavishkaar investments in India are typically low and lower-middle income with annual household income of less than $7,700.

With our new US$25m commitment to the Aavishkaar Bharat Fund, CDC is pleased to continue supporting the Aavishkaar team as it increases its investment activity in India’s underserved communities. Aavishkaar’s track record and experience put it in a good position to continue backing businesses that create economic opportunity and affordable products and services.

Vineet Rai, Founder of the Aavishkaar-Intellecap Group said:

As the world prepares to meet the Sustainable development goals by 2030, it is imperative for private capital to act as catalyst in creating businesses that can tackle hunger and poverty. We are grateful to CDC for continuing to support our vision of building extraordinary companies that address these challenges without compromising the commercial nature of our fund.

CDC’s support will enable Aavishkaar to continue supporting companies that are providing new and innovative ways of reaching rural areas where the population has limited access to affordable goods and services. Recent examples of Aavishkaar investments that do this are:

Milk Mantraoperates an organised dairy supply chain that manufactures dairy products in Orissa. The business sources from 46,000 smallholder farmers (up from 6,000 at the time of Aavishkaar’s investment) across 400 collection centres located in local villages. The milk is then transported to chillers and finally to a processing plant via insulated trucks where it is manufactured into paneer, yoghurt and lassi. Smallholder farmers choose to sell their milk to Milk Mantra because they are paid for the fat content as well as volume to the precise millilitre, they receive timely payments every 10 days and they gain comfort from regular engagement with field officers, giving them opportunities to learn best practise and voice grievances closer to home.

Neprais an Ahmedabad-based waste management company that operates a dry waste supply chain by connecting generators of waste and informal waste pickers to recyclers. Cardboard, plastic and paper is collected from over 1,600 waste pickers (up from 170 pre-investment) at over 20 collection points across the city and is then transported to a facility that segregates and packages 30tns of waste/day. Waste pickers choose to sell their waste to Nepra rather than the local ‘kabaddiwala’, or scrap merchants, because they are paid fairly by the gram and receive better rates for plastic and cardboard, increasing their income by 20-25%.

Agrostarenables the retail and last mile distribution of agricultural products including seeds and hardware to 120,000 farmers (up from 32,000 pre-investment) across Gujarat and Maharashtra through a mobile-based platform. Farmers place orders via mobile and receive product delivery at their home within 3 days. Farmers choose to buy their inputs from Agrostar because they trust product quality, often they find many counterfeit products in the market. They also gain comfort from the customer service provided across several touch points from the call centre to the field agents in their local districts.

Aavishkaar Venture Management was set up in 2001 by Vineet Rai and is part of the Aavishkaar-Intellecap Group. CDC has developed a strong relationship with Aavishkaar, having committed US$25m to Aavishkaar India II Company Ltd. in 2011 which raised $94 million and $15 million to Aavishkaar Goodwell Microfinance Development Company II in 2012 which raised $30 million.